Unless you’ve been hiding under a rock for the last couple of years, you’ve surely heard of blockchain technology—albeit you may not understand it. Like technological advents of the past, e.g. the personal computer and the internet, blockchain technology may soon become a cornerstone of our day to day lives, especially as it pertains to transactions. Given that the largest transaction many Americans make every month revolve around their mortgage, it behooves us to understand how this new technology affects real estate.
What is blockchain technology?
Blockchain is a global multipurpose online database that anyone with an internet connection can use, but it doesn’t belong to anyone. More specifically, blockchains are ledgers that accept inputs from lots of different parties, can only be changed when there is a consensus among the group, and has no need for a central authority to approve transactions. They are constantly growing as transactions are recorded and added to them in chronological order, allowing market participants to keep track of digital currency transactions without central record keeping.
What value does this technology bring to real estate?
In short, blockchain makes the process of purchasing property more efficient, transparent, and secure. As it stands, the financial verification element elongates the already lengthened sales process. By using a blockchain ledger to prove authenticity, homeowners could legitimately transfer ownership immediately without taking additional time to get a third-party verification. In this instance, cutting out the middleman saves a homebuyer both money and time.
Although blockchain technology provides a high level of privacy—by ensuring that transaction details are shared only among the participants—it also provides a high level of transparency. This is because blockchain systems include a fully auditable and valid ledger of transactions, that is indelible and unforgeable. Furthermore, Houses could be given their own digital identities, which would include the chain of ownership, a documented list of repairs and refurbishments.
In terms of security, forgery of property ownership documents remains a costly and effective scam that plagues the real estate sector.
Needless to say, it would be useful for everyone to have access to a decentralized source of record saying who owns what property. Once a land distribution is agreed upon by market participants, it can be recorded in a distributed ledger and no longer be subject fraudulent claims. Irrespective to forgery, paper records of ownership are subject physical degradation, which blockchain technology safeguards against.
As futuristic as blockchain in real estate may sound, it is already here. In October 2017, the first property sale with blockchain technology was announced in the Ukraine. A Ukrainian developer sold a property to the co-founder of the tech news site TechCrunch via smart contracts on a blockchain, pioneering a new era in real estate acquisition.